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What journal entry recorded by the lessor

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Reference no: EM132762491

Barry Limited and Allen Limited enter into a finance lease agreement with the following terms:

  • lease term is 4 years
  • estimated economic life of the leased asset is 5 years
  • 4 × annual rental payments of $15 000 each payable in advance
  • residual value at the end of the lease term is not guaranteed by the lessee
  • interest rate implicit in the lease is 8%.

Problem 1: The journal entry recorded by the lessor when the first lease payment is received would be:

Select one:

Option 1: Dr Cash $15,000
Cr Interest revenue $5,175

Option 2: Cr Lease receivable $9,825
None of these

Option 3: Dr Lease receivable $15,000
Cr Asset $15,000

Option 4: Dr Cash $15,000
Cr Lease receivable $15,000

Option 5: Dr Cash $15,000
Cr Reimbursement revenue 15,000

Reference no: EM132762491

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